Litigation: Case serves as cautionary tale to Lanham Act plaintiffs

On Jan. 2, Apple found itself on the wrong side of a ruling by a federal court in Oakland, Calif., that should serve as a cautionary tale to Lanham Act plaintiffs contemplating exactly what counts to include in a forthcoming complaint. The ruling confirmed that what might previously have been a knee-jerk decision to tack a false advertising count on to a standard trademark infringement complaint should be approached with caution, and the count added only if truly warranted under the circumstances.

In early 2011, Amazon released its Amazon Appstore for Android. The Amazon product functions similar to other app stores, allowing consumers to shop for and download applications for use with their mobile devices. Apple objected to Amazon’s use of the name “Appstore,” first coined by Apple in conjunction with apps for its iPhone devices, in association with the Amazon product.

When Apple decided to file suit, in addition to a claim for trademark infringement under §43(a) of the Lanham Act (and associated common law claims), and a claim for dilution under §43(c) of the Lanham Act (and associated state law claims), Apple chose to assert a claim for false advertising under §43(a) of the Lanham Act. This is a common pleading tactic in cases such as this. But is it sustainable? At its core, this is a trademark infringement dispute; Apple believed that Amazon was attempting to draw consumers to Amazon’s app store by using a name— “appstore”—that Apple felt deceived consumers into believing that Amazon’s store is associated with the popular Apple store of the same name. The question then is whether this familiar factual scenario supports an allegation of false advertising, in addition to trademark infringement and dilution. Amazon believed it did not, and thus brought a motion for partial summary judgment against Apple’s false advertising claim.

Specifically, Amazon alleged that Apple could not establish the first prong of the test for false advertising—that Amazon had made a false statement of fact about its own or another’s product. According to Apple, Amazon’s use of “appstore” was a false statement of fact about Amazon’s own product, because Amazon’s use of that phrase deceived consumers into believing that Amazon’s product was somehow affiliated with Apple’s better known “appstore”. The problem with this position, as noted by Amazon, is that it is no different than a garden variety trademark infringement claim. Apple’s belief that “appstore” is a source-indicative phrase that consumers necessarily associate with Apple products is the subject of Apple’s trademark infringement claim. Use of the phrase “appstore,” however, is not a statement of fact, such that it can support a claim for false advertising. In fact, Amazon argued, there are no statements of fact at all contained in the phrase Amazon Appstore for Android. It was on this basis that Amazon moved for, and obtained, partial summary judgment.

In a Jan. 2 ruling, the Hon. Phyllis J. Hamilton in the U.S. District Court for the Northern District of California found in favor of Amazon on this issue and dismissed Apple’s false advertising claim. The short term implications of this result for Apple are minimal—Apple still has its infringement and dilution claims and can proceed with its case against Amazon. But the long term implications are less clear. This is the second major battle Apple has lost in this case, after failing in a bid for a preliminary injunction on the infringement claim earlier in the case. Has Apple done any lasting damage to its standing and image with the court? That is a question that can never be fully answered, but is likely one that both sides have considered. Moreover, Apple’s twice-rebuked aggressive litigation tactics could easily influence the court’s ultimate evaluation of whether this is an “exceptional case” warranting the award of attorney’s fees. Should Apple ultimately prevail, Amazon’s victories in these early battles will be a centerpiece in opposing any fee petition. And should Amazon prevail, it surely will point towards having to engage Apple on these issues as a prime reason why an award of fees is appropriate.

The ultimate take-away then, is one that should always be a part of any potential plaintiff’s pre-suit analysis. When considering which claims to assert, careful thought should be given to whether each contemplated claim is truly warranted under the specific factual scenario. And, in the case of traditional infringement and dilution claims, plaintiffs should tread carefully before making a knee-jerk reaction to tack on a claim for false advertising.